Wednesday, March 20, 2013

MARCH 26, 1892 – BIRTH OF PAUL DOUGLAS, ECONOMIST, US SENATOR, QUAKER

1892 – BIRTH OF PAUL DOUGLAS, ECONOMIST, US SENATOR, QUAKER
Douglas was a prominent University of Chicago economist who helped develop “A
Program for Monetary Reform” in 1939 -- sent to President Roosevelt as a means
to end the Great Depression. More than 230 economists from 150 universities
approved it without reservations while an additional 40 supported it with some
reservations.
In assessing the problem of the day, the PMR states, “If the purpose of money
and credit were to discourage the exchange of goods and services, to destroy
periodically the wealth produced, to frustrate and trip those who work and
save, our present monetary system would seem a most effective instrument to
that end.” It also stated monetary systems based on a gold standard “has
had…disastrous results all over the world.”
The PMR called for government creation and maintenance in the quantity of
money. “Our own monetary policy should…be directed toward avoiding inflation as
well as deflation, and in attaining and maintaining as nearly as possible, full
production and employment.” The plan also called for eliminating fractional
reserve lending – the process of banks loaning ourt many more times the amount
of money in their possession. Back in the 1930’s the reserved requirement was
5:1. Today it’s 9:1. Some of the major banks involved in the economic collapse
of 2007 had ignored this law and were loaning out 50 times their reserves. The
PMR called for a 100% reserve requirement – banks could only lend the amount of
money they possessed.
The document goes on, “In early times the creation of money was the sole
privilege of the kings or other sovereigns – namely the sovereign people,
acting through their Government. This principle is firmly anchored in our
Constitution and it is a perversion to transfer the privilege to private
parties to use in their own real or presumed interest. The founders of the
Republic did not expect the banks to create the money they lend.
Their plan to reduce the national debt was simply to have the government
purchase government bonds with new US debt-free money.